Personal accounts: delay in new pension plans until 2016?

29 September 2009

The Personal Accounts scheme is being created to provide a low-cost, independent, workplace pension scheme that any employer can use. It aims to provide access to workplace pension saving to millions of people – typically those on low to middle incomes.

The personal accounts scheme will be:

• a trust-based occupational pension scheme regulated by the Pensions Regulator;
• designed to meet all the requirements of the auto-enrolment reforms and designed specifically for low-to-moderate earners;
• run in the interests of its members by a not-for-profit trustee corporation;
• available to employers who want to offer the minimum contribution or more;
• easy and low-cost for employers to administer and with low charges for members.

Employers will be able to choose to use the personal accounts scheme or another qualifying workplace pension. Under the plan, employers will be compelled to automatically enrol staff into the scheme and contribute 3% of their salary. Employees will contribute 5%.

The Department for Work and Pensions announced on 24 September 2009 that rules requiring all firms to automatically enrol employees in pension schemes and make a contribution will be phased in over three years from October 2012. This was contained in the publication entitled Pensions (Automatic Enrolment) Regulations 2009: Government response to the consultation.

However, the day after the announcement, an article in The Guardian has suggested that the new system will not be fully operational until 2016. The delay has been attributed to concerns raised by a number of employers who state they are unable to cope with the higher costs and administration that automatic enrolment will involve, as part of the Personal Accounts scheme.

There is no official announcement that has countered this article and of course, it may not in fact be correct. However, it underlines the need to keep abreast of developments in what is a rapidly changing area of pensions law. We will keep you informed of developments in this and other pensions related matters.

To access the Pensions (Automatic Enrolment) Regulations 2009: Government response to the consultation please click here.